Privatizing Social Security unworkable politically, economically
In this morning’s post, I talked about today’s political environment as “a primal scream of denial, an insistence that easy answers be found — right now!” A recent Wall Street Journal/NBC News poll adds some weight to that description.
Voters were read a series of positions or actions and were asked whether they would make them more or less enthusiastic about supporting a candidate for Congress. In response, 50 percent said that they would have reservations about, or would be very uncomfortable about, a candidate who supported the economic policies of Barack Obama.
On the other hand, 62 percent said they would feel that way about someone who supported the economic policies of George W. Bush.
The poll also found that 49 percent of voters would feel very uncomfortable about a candidate who proposed to phase out Social Security and instead allow workers to invest in the stock market. Only 21 percent said they would be enthusiastic or comfortable with a candidate taking that approach.
That’s an interesting number, given that more and more Republicans are once again beginning to raise that possibility. But I want to set aside the polling numbers for a moment and consider a very practical problem with that idea.
Proponents of that approach almost always say that they will guarantee the Social Security of all current recipients as well as those over 50 or 55, while allowing younger workers to opt out the system in favor of private accounts. Politically and morally, that kind of guarantee would be essential, and everyone understands that.
So here’s the problem. The Social Security benefits for those older folks would have to be financed by continuing taxes on those still young enough to be working. For better or worse, that’s how the insurance system works: Today’s workers help finance today’s retirees.
So where is the money that those younger workers would set aside to invest in their own retirement? That would have to come on TOP of what they’re paying to support Social Security. They will be paying to support today’s retirees AND paying to finance their own private accounts, in effect paying for two retirement systems at the same time.
If you add in the fact that today’s and tomorrow’s taxpayers are obliged to repay $2.5 trillion to the Social Security Trust Fund — money that was borrowed over the last 25 years largely to help offset tax cuts for the more affluent — you’ve got a third retirement-related burden to handle.
I haven’t heard any proponent of private accounts explain how the accounting of all this could possibly work. Even President Bush, in his aborted attempt at privatization, never really explained how that transition could be financed without adding trillions more to the national debt. In other words, those 49 percent are right to be deeply uncomfortable.
Tell us what you think about the site
Customer Care »
Vacation stops, manage subscriptions and more
AJC Services
Sections
Other Editions
Visitor Agreement | Privacy Statement
© 2013 The Atlanta Journal-Constitution
248 comments Add your comment
Doggone/GA
September 8th, 2010
3:25 pm
“Here is an interesting article about the Black Death and the family unit.”
Yes the aftermath of the Black Plague (and other plagues) were “interesting” to say the least. The plagues were also responsible for the peasant workers being able to flex some of THEIR muscle as well. Since there were far fewer people to do the work, the workers had some leverage is how they were treated and paid.
Bosch
September 8th, 2010
3:25 pm
Union,
Yeah, and I’m still waiting on Dick Cheney to be less evil.
Union
September 8th, 2010
3:25 pm
“President Barack Obama, in a combative, campaign-like speech in Parma, Ohio, conceded that his policies have “fed the perception that Washington is still ignoring the middle class,” even as he castigated Republican opponents for “riding…fear and anger all the way to Election Day.”
obama has a new title.. “captain obvious”
jm
September 8th, 2010
3:26 pm
HDB – I’m referring to SS. And it is a hammock, one that is about to break. Since SS is “for everyone”, it will ultimately be for no one since it isn’t affordable.
As Alan Simpson said, correctly:
“If you have some better suggestions about how to stabilize Social Security instead of just babbling into the vapors, let me know,” he writes. “And yes, I’ve made some plenty smart cracks about people on Social Security who milk it to the last degree. You know ‘em too. It’s the same with any system in America. We’ve reached a point now where it’s like a milk cow with 310 million tits! Call when you get honest work!”
Union
September 8th, 2010
3:26 pm
bosch.. is dick in office? err.. dick cheney that is..
godless heathen
September 8th, 2010
3:26 pm
http://learnyourdamnhomophones.com/
**Bad language warning**
HDB
September 8th, 2010
3:28 pm
jm
September 8th, 2010
3:17 pm
Art Blakey, Mingus, Miles, Coltrane, Joe Williams, Nina Simone…. ah, a bygone era. People dressed up kinda nice then too. Such a classy age.”
Not THAT far gone…..but you’re dead on…..particularly with Joe Williams, Nina, and Billy Eckstine!!
jm
September 8th, 2010
3:30 pm
Doggone 3:23 – I really don’t care to discuss marriage laws because I don’t really care. But facts are facts. The states write the laws about marriage, inheritence, etc., they’re different in every state.
If the state wasn’t involved, it wouldn’t matter what state one gets married or divorced in, but it does make a big difference since they all have different rules, in particular when a divorce takes place which is the contract break up “penalty” phase.
If you won’t acknowledge that the states write the contracts (which can be supplemented by personal legal agreements, but which the state can overrule), you’re delusional. Why should the state be involved in writing my marriage agreement?
Bosch
September 8th, 2010
3:30 pm
Geez, jewcowboy, that was the most depressing article I’ve ever read.
Bosch
September 8th, 2010
3:30 pm
Union,
What? You get your rhetoric, but I don’t get mine? Fascist.
Union
September 8th, 2010
3:32 pm
bosch..
HDB
September 8th, 2010
3:32 pm
jm September 8th, 2010
3:26 pm
As many have said….lift the cap, a 3% increase for those above $1M, and raise the retirement age for those less than 45 presently would save SS. Not everyone is in the SS-System….so that is also a fallacious statement! Not all aspects of the government subscribe to SS!! At times, I think Alan Simpson suffers from “Sometimers” rather than “Alzheimers”!!
Bosch
September 8th, 2010
3:32 pm
OK, so Nathan Deal’s entire campaign strategy is to link Barnes and Obama. Does he actually have a plan for anything else?
jm
September 8th, 2010
3:33 pm
my 3:30 post – I have one argument to answer my question, but Doggone, you don’t seem to think the state is involved, so I don’t know why I’m writing this. The legal costs for marrying couples of whatever sort, if they had to write their own personal agreement, would be excessive for 90% of america. Ergo, it makes sense to write the agreements so everyone doesn’t have to write their own.
But don’t deny that the state writes the rules.
jm
September 8th, 2010
3:34 pm
Bosch 3:32 – hey funny issue. Apparently Deal has $0 available. All the adds are from the RGA (repubs gov assoc). They’re the ones running those ads. He’s broke after runoff.
jm
September 8th, 2010
3:36 pm
For liberals, at least Alan Simpson is willing to raise taxes to help SS. Every other republican is fine watching it crash and burn.
jewcowboy
September 8th, 2010
3:40 pm
Bosch,
This should cheer you up:
http://www.youtube.com/watch?v=qkJdEFf_Qg4
Jefferson
September 8th, 2010
3:41 pm
Deal can’t run on his own two feet, GOP playbook.
MPercy
September 8th, 2010
3:41 pm
jewcowboy @1:44 pm
“Are you willing to sacrifice your benefits and all you’ve paid into it so far to be the first to forgo ss?”
Where do I sign up?!! I will gladly walk away from the ~$100K I have paid into SS if I’m not forced to continue paying into it ever again.
jewcowboy
September 8th, 2010
3:44 pm
Ok, evidently I have knack fro running off people:
First it was Bruno and the 14th amendment and now it is chuck with the 14th amendment…what is it about the 14th amendment that anti-gay marriage people don’t like?
jewcowboy
September 8th, 2010
3:47 pm
MPercy,
“Where do I sign up?!!”
And you promise if you live past your account balances, have a catastrophic illness that depletes your savings, or some one Madoff’s with your saving, you will have the decency not to ask taxpayers to foot any of your bills, right?
The Brothers Koch
September 8th, 2010
3:48 pm
One tenth of one percent of the people in this fine nation (the club we belong to) raked in over twelve percent of all of this nation’s income (can you imagine that some people think that we few couldn’t possibly have earned so much) and you people treat us as though we’re evil rich people by expecting us to pay more total dollars than the other 99.9 percent of you lazy people combined. Now how do you possibly think that is fair. We deserve better. Vote Republican.
Paul
September 8th, 2010
3:53 pm
BOSCH
“Starbuck is going to CSI ”
YESYESYESYESYESYESSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS!!!!!!!!!!!!!!!!!!
that’s really swell news.
jewcowboy
If I can get all religious on you for a moment, maybe this’ll help: I have it on very good authority there’s a special place in Hell (any Hell, religion doesn’t matter) reserved for those idiots who would try to steal an Audi such as yours. Only out they have is to plead they shouldn’t be held responsible because they’re too #!!$#% stupid to realize a car like that is designed to NOT be stolen.
$@!!## morons…..
Regarding the IRS data on which income band earns what and how much they pay in income tax: Rule of Thumb: always question the assumptions. Sure the data came from the IRS. But it doesn’t portray how much income the top whatever earned and how that relates to total taxes paid.
Those charts used Adjusted Gross Income. Not Gross Income. Adjusted. As in, deduct SEP contributions, IRA contributions, alimony paid, etc etc etc. Say someone earns a mil. They put 200K into a Sep, pay three exwives alimony of $600k total, their gross income is a mil and their AGI is 200K. Say the taxes paid are $100k. That looks like a 50 percent rate. Not ten percent (based on a mil).
Sure, the IRS says AGI are statutorily-based deductions. But hey, the earnings are the earnings. The deductions are whatever Congress wants them to be.
Fun with numbers.
The impact, of course, is to make the rate of taxes paid appear higher than it would be if the deductions were excluded.
Then there’s the business of computing other income, prior to the AGI deductions, with allowances for certain writeoffs….. which further understates earnings…
Paul
September 8th, 2010
3:55 pm
Bosch?
Dick Cheney can become less evil.
But Charlie Rangel cannot become less of a crook!
A late boomer
September 8th, 2010
3:55 pm
This one is a tough nut to crack. First, I am a baby boomer. Born 1961. I have 20 years till retirement. The government has taken over $200k from me lifetime so far. If SS were scrapped today, 20 years is simply not enough time to make up that much money. I have saved… enough that IF I receive SS, then I will live a decent retirement.
Social security is NOT my fault anymore than Obamacare is the fault of each and every person reading this thread. Oh, you didn’t want Obamacare? That won’t matter… your children and children’s children will curse you and blame it on you. Social Security was passed almost 30 years before I was born. So those of you who generically blame it on “the boomers”… go f**k yourselves. You have no idea of what you speak. Most of the people who are to blame are in retirement right now. 20 years worth of baby boomers have yet to retire, and they never had a choice in the matter. They are victims the same way you are. They were robbed just as you are being robbed now.
Back to the point: The government has taken half a life savings from me. With 30 years interest on that money, you can see that I would have MORE than enough for my own retirement. Without social security now, I will live in poverty before I die (if actuarial tables apply). This was not a bed of my making or my choosing. Compound that with the very worst investing environment of any generation for 100 years:
http://moneywatch.bnet.com/retirement-planning/blog/retirement-beat/late-baby-boomers-the-worst-off-401k-generation/490/
The late baby boomers are screwed and will live in poverty if Social Security blows up. We will suffer that fate because the old folks of 1935 refused to suffer that fate. “Greatest Generation” my azz. “Greatest bunch of moochers” is who they are in retrospect. They took their adverse situation as an opportunity to rob from their children (the boomers). The difference between the early boomers and the late boomers is that the early boomers had a VERY favorable investing environment and were able to amass wealth. The late boomers, while investing, have seen pitiful returns as crashes and recessions have reigned during their investment years.
chuck
September 8th, 2010
3:57 pm
Just had some work to do Jewcowboy. Again, 14th amendment doesn’t apply and neither does the Civil Rights Act. Your decision to be homosexual doesn’t matter. It isn’t a protected class.
jewcowboy
September 8th, 2010
4:00 pm
Hi Paul!
“I have it on very good authority there’s a special place in Hell ”
That’s exactly what I wrote on facebook after it happened! The responding officer called the moronic a-holes. They ripped open the whole dashboard trying to get to the ignition. Nick Cage and Angelina Jolie they were not.
jewcowboy
September 8th, 2010
4:04 pm
chuck,
“Again, 14th amendment doesn’t apply”
Just b/c you say it does not make it true.
“It isn’t a protected class.”
I never said I was…as a matter of fact the whole point of gay marriage is to be just like everyone else..and to enjoy the same privilege of choosing ones partner that heterosexuals enjoy.
Again, please give me one legal reason, that does not involve your opinion on homosexuality, why gays should not be allowed to marry.
MPercy
September 8th, 2010
4:09 pm
Doggone, I’m just thinking about the common notion that people usually get “married” in a church, but if they don’t do that, they often have a “civil ceremony”. But I can see that these were called “legal marriages”. I stand corrected, as apparently the discourse should be in distinguishing “religious marriages” from “legal marriages” (if such distinctions are required, and only the latter should have any standing with respect to government-conferred benefits/perqs). My one problem here is that government has seemingly conflated the former with the later, which was a mistake and an unnecessary overlap of church and state.
jm
September 8th, 2010
4:20 pm
A late boomer – you can choose not to retire. But I don’t see boomers doing that. I personally don’t expect I’ll ever retire. Best chance I’ll get is working 50% of the time until I’m bedridden. Would be nice if the boomers would keep working instead of all quitting at the early retirement age of 62….
So your generation’s choices are part of the problem. Although I must say I’m not shocked by the choices they’re making.
barking frog
September 8th, 2010
4:20 pm
Social Security is the way the wealthy pay their
Medicare and Medicare Supplement premiums,
thus it will endure forever.
AT
September 8th, 2010
4:24 pm
A late boomer…
Perpetuating a system that doesn’t work doesn’t make sense. Your comments illustrate the danger of putting the gov’t in charge of things it has no business in. The founders knew this. The government has sucked you in to believing you need them and so you continue to empower them with your complicity in return for your perceived security.
Your assumption that the gov’t will be there for you in 20 years is..sorry…but it is foolish. You are smarter than this. I’d like to think that the American spirit, your American spirit, is stronger than this. You have 20 years? You have talents that can be used for those years to provide for yourself. Don’t believe the lie that we need the gov’t. They own you if you do.
Jefferson
September 8th, 2010
4:29 pm
SS will be funded, as the banks were bailed.
dbm
September 8th, 2010
4:30 pm
It is morally necessary to get rid of Social Security as soon as politically possible for two reasons.
1. Social Security is fundamentlly a fraudulent pyramid scheme or Ponzi scheme.
2. Social Security entangles government very much in an area in which it should not be involved at all.
It is possible to argue the ethics both ways between a gradual phaseout and abrupt abolition. “As soon as politically possible” will probably imply a gradual phaseout (which could be speeded up later if there were enough political support).
Granted, this will require some people to pay for a combination of their own retirement and the retirement of others. This will be softened by the ability to use compounding to grow a relatively large account with a relatively small investment. It can also be softened by making the phaseout gradual.
Paul
September 8th, 2010
4:33 pm
late bloomer 3:55
“The government has taken over $200k from me lifetime so far”
Not to pry, but are you sure about that number? You’re what, 50? Began work when? Early 80s? Here’s a table showing the maximum amount that could be paid in a year – it’s the OASDI (old age, survivors disability). Also includes Medicare (HI – health insurance). You might want to recheck.
“http://www.ssa.gov/history/pdf/t2a4.pdf
jewcowboy
Now it sounds as if the insurance company’s being morons. Well, hopefully there are a couple of Audi dealers in the area so you can find who’ll do the best work. Should be covered under comprehensive?
barking frog
September 8th, 2010
4:34 pm
dbm 4:30 1. Social Security is fundamentlly a fraudulent pyramid scheme or Ponzi scheme.
—————————————————————————————–
Ponzi never had the power to tax.
Paul
September 8th, 2010
4:34 pm
late bloomer
link, again
http://www.ssa.gov/history/pdf/t2a4.pdf
MPercy
September 8th, 2010
4:47 pm
jewcowboy 3:47 pm “And you promise if you live past your account balances, have a catastrophic illness that depletes your savings, or some one Madoff’s with your saving, you will have the decency not to ask taxpayers to foot any of your bills, right?”
But of course!
I believe that I have absolutely no right to force you or anyone else to provide for my wants and needs; I likewise think that you have absolutely no right to force me to provide for your wants and needs.
Martin Luther
September 8th, 2010
4:56 pm
I don’t care what hateful name you want to call me, I don’t care how much you want to label me or destroy my character, I don’t care what political party you would to assign me, I don’t care if you would like to tear down my family’s good name, again, I can take it, I already have, just please do one thing, not just for me, for all of us, can we please end entitlement programs for the rich first, and now, I just can’t support them anymore, my family can’t support them anymore, we’re good people, we’ve served our country, we work hard and we love the teachings of Jesus Christ, if not religion, so please save this country now. we all know what is happening, with the exception of the mentally ill and the lowest of IQ’s, if you’ve supported something that was wrong and hated on other people to protect those bad decisions, please be strong enough to save us all now by admitting to errors and using that humility and knowledge to make America America again. we’re losing it folks, just look at so many examples from the past that are right in front of our eyes as fancy magicians in political attire distract us from what’s good and what is truth. the children are not our future, we are our children’s future. I hear so many people saying that, but so few willing to swallow a little selfish pride to make that a good future. forget politics, just please take the corporations that get credits for moving manufacturing jobs overseas off of their entitlement programs, programs by the way that are larger than anything we can give the poor or the weak or the sick, they just don’t need that much, they just need to get through another day. but the rich will always be thirsty and hungry, something that can never be quenched, especially through the ease of constant handouts. as much that is made about to be sinical about those that are hurting the most economically(’their living beyond their means’ kinda crap), the one that looks most liking a chick in the nest constantly begging for more food are the rich, not the middle class or the poor. please, please, please, people go for what is real and save this country now, my family and wonderful animals can’t afford to support the rich anymore, but because of the BS, we can’t kick them out of our house either! why? why must my family suffer for someone that probably was born into wealth and never earned anything, why? I love America, too.
dbm
September 8th, 2010
5:01 pm
barking frog
September 8th, 2010
4:34 pm
That’s what makes Social Security more stable than what Ponzi did – physical force.
barking frog
September 8th, 2010
5:05 pm
dbm 5:01 That’s what makes Social Security more stable than what Ponzi did – physical force.
———————————————————————————————–
not just more stable, failsafe.
Cuz
September 8th, 2010
5:07 pm
i hear ya. rich people have become like a roommate that ain’t paying any rent, ain’t working and when you come home the fridge is empty, they drank all your beer and the place is even more messy than when you left!
huh?
September 8th, 2010
5:09 pm
how did we get so duped into to paying for companies just to build their plant and do business in our state or any other state? how the heck did we get this far? this is capitalism? really?
A late boomer
September 9th, 2010
9:00 am
Paul wrote:
“Not to pry, but are you sure about that number? You’re what, 50? Began work when? Early 80s? Here’s a table showing the maximum amount that could be paid in a year – it’s the OASDI (old age, survivors disability). Also includes Medicare (HI – health insurance). You might want to recheck.”
I don’t know what you are suggesting, Paul, but I have been paying max social security for over 20 years, and have been paying since I was 16…. in 1977. Look at the document you sighted on page two in the “self employed section” now, start adding up the max for the last 20 years. 12% of my income for the last 33 years with 20 years of max adds up to OVER $200k. I rounded down.
A late boomer
September 9th, 2010
9:09 am
AT wrote: “The government has sucked you in to believing you need them and so you continue to empower them with your complicity in return for your perceived security.”
The government didn’t suck me into believing anything, My complicity? You think I had a choice?
He then further lamely writes , “You are smarter than this. I’d like to think that the American spirit, your American spirit, is stronger than this.”.
Sorry , bud, but I never had 12% of my gross salary to pay to someone else AND another 25% of my gross salary to set aside for my self. How many people anywhere in the world are able to set aside 40% of their gross salary for retirement? It has nothing to do with platitudes of the “American spirit” or how “strong I am”. It has do with basic math. I managed to save 12% of my own salary, and the government took 12%. That’s 24% of my gross salary for a lot of years. That is about all anyone can expect. How many people do you know, today, with that kind of commitment? I thought so. Take your platitudes and save them for someone that hasn’t already sacrificed all their working years.
hewhoasks
September 9th, 2010
11:27 am
For a country with demographics like those of the US privatization of the general retirement system monies will never work. The proponents of privatization point to the stock market and say that investing in that will provide a chance of a higher rate of return than the rate from Social Security. That chance is far lower than the chance of winning the Power Ball jackpot. On the other hand the chance of having a large portion of the investment lost is very high: about the same as the chance that it will rain this year. The stock market is a market. When retirees in large numbers begin to withdraw money from their stocks the stock market will decline. It MUST decline, because it is a market and that is how markets work.
So then many of the proponents mumble something about moving the money to safer investments when near retirement age. Duh. That’s selling stocks, and that selling will make the market go down. MUST.
Then there are some who say that well, the solution is simple: invest in US Treasury bonds. That is exactly what the Social Security system does right now. But then these same people are largely the ones who say that the current surplus in the Social Security fund is “just a bunch of worthless IOUs in a file cabinet.”
And there’s the people, almost all of them Republicans, who keep spreading the mantra that “Social Security won’t be there for the young.” It is these same people, Republicans, who are most eager to take Social Security away from the young. They are warning the voters about themselves and asking the voters to support them in doing precisely what it is that the warn will happen.
dbm
September 10th, 2010
5:20 am
hewhoasks
September 9th, 2010
11:27 am
There will be more people selling stocks, but three things:
They will be spread out over time. Not everyone retires at once.
Even sooner, there will be more people buying stocks, and this will continue.
There is a lot of buying and selling anyway, much of it by people who try to profit by frequent buying and selling.
Rubio runs away from Social Security privatization : The Reid Report
September 14th, 2010
12:00 am
[...] has now been confirmed: Marco Rubio’s team can read a poll. He now claims to be opposed to privatizing Social Security, even though his support for creating [...]